A new haircut or wardrobe overhaul can work wonders in terms of giving someone a fresh outlook on life and a self-esteem boost. The same can be said for a money makeover. While it might not be quite as fun as a traditional makeover, a money makeover can improve your finances. Best of all, unlike other kinds of makeovers, a money makeover can actually save you money.
Step 1: Identify your flaws.
Any makeover begins with identifying the things you want to change. Sit down, make an honest assessment of your current financial state, and then list a few things that you wish were different. For example, your list might include:
- Save more money
- Purchase a house
- Stop relying on credit cards
- Figure out where all your money goes
Be honest at this stage. You need to face up to things you want to change if you want your life to be different. At the same time, if your list is a mile long, don’t beat yourself up over it.
Step 2: Decide what you want to change.
If you’re like most people, your list of potential financial fixes is a bit overwhelming. Since you won’t be able to tackle everything at once — and because there are some things you may not be able to change at all — you’ll need to prioritize.
Look at your list and highlight a few items you think would make the biggest difference in your life and that you can actually do something about. Say you want to buy a house so you can stop renting, but reckless spending has left you with poor credit. Rather than focusing on changing your living situation, you might be better off focusing on improving your credit score, so that one day you can buy that dream house. Or you may wish you had more disposable income. A raise may not be on the table at work, but you may find more income by committing to a budget and reining in unnecessary purchases.
Step 3: Take action.
The next step is to actually implement your makeover. Take the steps you need to make the necessary changes in your life. It may be helpful for you to come up with a calendar or list of specific action steps to keep you on track and help prevent getting discouraged.
For example, if you’re looking to improve your credit score, you might make a list of specific things you need to do to make that happen with deadlines for each one. For example, check your credit report for errors, automate bill pay in order to avoid future late payments, and pay off one credit card in full in two months.
If it’s your spending that’s the problem, you might start by simply tracking how and when you spend for a week or two. Then, you might look at that information and see that you’re spending $40 per week on after-work drinks. Once you know that, you can make an effort to stop or reduce spending and dedicate that money to other goals.
Step 4: Get help if needed.
You don’t necessarily need fancy tools to give yourself a financial makeover. But it often helps when someone has your back. If you’re worried about your ability to turn your makeover dreams into reality, you may want to seek the help of an expert on issues related to taxes, retirement, college planning, debt repayment, and more.
Not only can they provide valuable and objective advice, but they’ll also be a coach who can help you stay on track and achieve your money makeover goals.
Celebrate your success. As you take steps to change your financial life, be sure to stop and celebrate your successes. Give yourself a pat on the back — and perhaps a small reward — when you pay off that credit card, stick to your monthly budget, or set up automatic contributions to your retirement account at work.